The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) welcomes another year of expansionary 2022 Budget, which is anchored on three strategic thrusts: “Strengthen Recovery, Build Economic Resilience and Accelerate Reforms” with a new record total Budget’s allocation of RM332.1 billion to secure Malaysia’s post pandemic next phase of sustainable economic recovery with enhanced economic resilience.
Given the uneven pace of recovery and pandemic’s deep economic scarring effects still unfolding, it is utmost important that the Ministries and government agencies must enhance their efficiency, strengthen the capacity to implement the projects and programs as well as disburse the money timely.
Expansionary spending will not necessarily lead to a positive impact on economic output and income growth if the multiplier effect is restrained by inefficiencies, delay in implementation and cost overrun.
The Budget’s strategic thrusts and areas of focus are broadly in line with our proposals. It includes continued provision of cash assistance to the targeted vulnerable and lower-income household groups, financing mechanism and credit facilities for micro and SMEs (MSME), tailor-made incentives and measures for specific sectors (such as tourism industry and electric vehicles) as well as tax treatment to ease operating costs; trade and investment facilitation (Industry4WRD, digitalization, and automation), continued support for MSME, creating jobs and retraining program; and initiatives for ensuring sustainable economic and business development (ESG and Green growth).
While the proposed 33% corporate tax rate (Cukai Makmur) on firms and businesses making profit above RM100 million for YA 2022 will certainly be a disappointment for those affected companies, we are concerned that the higher corporate tax rate would make Malaysia less competitive to our regional peers, and hence, dampen investment interests. The Government needs to reaffirm that this is a special “one-off” tax contribution and the government shall commit to a long-term competitive tax regime and predictable tax policy.
Ease Operating Costs and Tax Treatment
The continuation of wage subsidy for tourism, rental rebate and tax deductions on the rental of premises for workers’ accommodation will help to ease some burden of operating costs.
During the recovery, it is equally important to ensure cash outflow is minimised in terms of tax treatment when the economy is picking up. We welcome the Budget’s proposals to defer tax installment for MSME; allow revision to tax estimation; and extend the seven years condition to carry forward unabsorbed business losses and unutilised reinvestment allowance.
ACCCIM applauds the RM2.0 billion Special Strategic Investment Fund to attract foreign strategic investment to develop domestic SMEs in the integration of industry value chains; an allocation of RM100 million via Smart Automation Matching Grant for the manufacturing and services sector; and the extension of another two years for Special Reinvestment Allowance. These incentives would help to spur the private investment activities.
We hope that the Government can consider to further increase the Targeted Relief and Recovery Facility (TRRF) to ease the financing needs of SMEs.
Sowing The Seeds of a Green Recovery
The Government is demonstrating that they are totally committed to green agenda and moving towards a low carbon economy as a key pillar in the Budget for charting Malaysia’s pathway towards a more sustainable future.
ACCCIM believes that the Government can play an effective driver and enabler of change in promoting Green initiatives and ESG as a critical part of economic growth. Besides stepping up the awareness, both the public and private sectors can collaborate to drive and achieve the Sustainable Development Goals (SDGs). These include the design of incentives mechanism, covering tax or financial rebates and deductions for businesses that incur high initial costs toward a lower-carbon economy.